Case Law Details
G. Narasiman Vs. ITO (ITAT Chennai)
Belated return filed under section 139(4) could not be revised under section 139(5). Therefore, revised return filed by assessee was invalid and to frame assessment by considering such return as return filed under section 139(1) was in conflict with charging interest under section 234A for delay in filing of return. Therefore, levy of interest under section 234A was deleted.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This is an Appeal by the Assessee agitating the Order by the Commissioner (Appeals)-2, Coimbatore (‘Commissioner (Appeals)’ for short) dated 28-2-2017, dismissing the assessee’s appeal contesting its assessment under section 143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter) for the assessment year (assessment year ) 2012-13 vide order dated 25-3-2015.
2. The short question arising in this appeal is whether the ‘revised’ return furnished by the assessee on 21-10-2013 is a valid return in law. This is for the reason that the impugned assessment was made only in pursuance thereto, by issue of notice under section 143(2) on 8-9-2014. It may be relevant to, before we proceed to discuss the issue arising, state the background facts of the case, which are admitted and undisputed. The asses see-individual filed his return of income for the year on 29-9-2012, declaring nil income (copy on record). This was followed by a return on 21-10-2013 (copy of acknowledgment on record), again, at nil income, claiming a tax refund on account of tax deducted at source (TDS) at Rs. 92,724; there being, as it appears, no change in the configuration of the income returned. Assessment under section 143(3) was framed on 25-3-2015 at a income of Rs. 1,37,99,763. The assessee, in appeal, raised several grounds, challenging the additions made in assessment. Additional grounds were also raised, claiming that the impugned assessment is liable to be quashed as the ‘original’ return, filed on 29-9-2012, was not a return under section 139(1) but only a return under section 139(4), being filed after the due date of filing the return under section 139(1) i.e., on 31-7-2012 (Addl. Gd.1). Only a return filed under section 139(1) or that furnished in response to a notice under section 142(1), could be revised under section 139(5). The sub-sequent return filed on 21-10-2013 is, therefore, an invalid return. That being the case, no assessment under section 143(3) in its respect could be made. The learned Commissioner (Appeals), admitting the additional grounds challenging the validity of the assessment, in-as-much as the same raised a legal issue requiring (apparently) no investigation of facts, however, held in the negative. The assessee is a partner in a partnership firm ‘M/s. Venkatam Construction Engineers’ (VCE); the fact of his being a partner being also mentioned in the return filed originally. The return in case of a partner of a partnership firm, whose accounts are to be audited, the due date of filing of return under section 139(1) is that of the firm itself, i.e., 30th September of the following year, or 30-9-2012 for assessment year 2012-13. Even the return for assessment year 2011-12 was filed by the assessee on 29-9-2011 only. The original return filed on 29-9-2012 was thus a valid return under section 139(1), and not a return under section 139(4) (refer para 4 of the impugned order). He, then, proceeded to decide the assessee’s appeal on the merits of the additions made (vide paras 4.1 & 4.2 of the order). The assessee’s claim being denied thus, he is in second appeal, raising the following grounds :–
‘1. The order of the learned Commissioner (Appeals) is erroneous in law and against the principles of natural justice.
2. The learned Commissioner (Appeals) erred in not considering the grounds of appeal and additional grounds of appeal in proper perspective.
3. The learned Commissioner (Appeals), while admitting the additional grounds of appeal, erred in not considering the vital point that the due date for the appellant partner was 31-7-2012 and not 30-9-2012, for the appellant was not a “WORKING PARTNER”.
4. The learned Commissioner (Appeals) erred in not considering the point that since what was filed on 29-9-2012 was not a return of income under section 139(1), the sub-sequent return of income filed on 21-10-2013 could not be treated as a return of income under section 139(5) and hence, not valid in the eyes of law and that the assessment based on such invalid return of income was also not valid and required to be struck down.
And for other reasons that may be adduced at the time of hearing, your appellant prays that the appeal be admitted, considered and justice be rendered.’
3. Before us, the thrust of the assessee’s case was that the learned Commissioner (Appeals) had wrongly inferred that the original return was furnished under section 139(1). Drawing our attention to Explanation 2 to section 139(1), specifying the ‘due date’ for different classes of assessees, it was emphasized by the learned Authorised Representative, the assessee’s counsel, that it is only in case of a ‘working partner’ that the due date of filing the return under section 139(1) gets extended to that of the partnership firm. The assessee, though a partner in a firm whose accounts are subject to audit under section 44AB of the Act, is not a working partner. The learned Departmental Representative (Departmental Representative) would, on the other hand, draw our attention to Gd. 5.3 of the Grounds of Appeal before the first appellate authority, which reads as under, whereby the assessee, who now denies to being a working partner, claims to be so, so that the return filed on 29-9-2012 was filed within the time allowed under section 139(1), i.e., 30-9-2012 :–
‘5.3 The learned assessing officer has erred, in charging interest wrong by under section 234A, for a delay of one month, but however, since he is a working partner of a firm subject to tax audit, the return filed on 29-9-2012 was within due date.’
The learned counsel would, in rejoinder, submit that the assessee wishes to retract the statement of fact made per Gd. 5.3 before the learned Commissioner (Appeals).
4. We have heard the parties, and perused the material on record.
Section 139(4) of the Act allows a person who has not furnished a return within the time allowed under section 139(1), or within the time allowed vide notice under section 142(1), to furnish a return for any previous year within one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier. section 139(5) provides for any person, who having furnished a return under section 139(1) or in response to notice under section 142(1), to furnish a revised return within one year of the relevant assessment year or completion of assessment, whichever is earlier, in case he discovers any omission or misstatement in the return filed earlier. The Honorable Apex Court in Kumar Jagdish Chandra Sinha v. CIT (1996) 220 ITR 67 (SC), also relied upon by the assessee before the learned Commissioner (Appeals), has held that a belated return under section 139(4) cannot be revised under section 139(5). This in fact is also the clear mandate of the relevant provision (section 139(5)). Clearly therefore, in the event of the assessee’s first return (filed on 29-9-2012) being not a return under section 139(1), but a return under section 139(4), the same could not be revised and, accordingly, the return filed sub-sequently on 21-10-2013 becomes a non est return in law. The only manner in which the said return could therefore be taken cognizance of by the Revenue was to regularize it by issue of notice under section 148, i.e., in case of escapement of income from assessment. The assessee did not raise the aspect of validity of his second return before the assessing officer (AO). We state so as, where so, the assessing officer could have, if he found the assessee’s legal argument challenging his jurisdiction to assess valid, issued a notice under section 148. This is as the Revenue had information of large cash deposits in the assessee’s bank account maintained with Canara Bank, Saibaba Colony Branch, Coimbatore, viz. Rs. 55 lacs on 30-1-2012 (refer para 1/pg.1 and pg.3 of the assessment order). There being nothing amiss, the assessee’s filing a ‘revised’ return on 21-10-2013, i.e., as stated in the return (copy on record), being within one year from the end of the relevant assessment year, was regarded as such, i.e., a revised return under section 139(5). The learned Commissioner (Appeals) rightly admitted the assessee’s additional grounds, raising the legal issue, going to the root of the matter, i.e., the validity of the assessment based on the material on record. Rather, we find the assessee to have per Gd.5.3 of his grounds of appeal (before the first appellate authority) assailed the levy of interest under section 234A in-as-much as he was a working partner, so that the due date for filing the return under section 139(1) in his case was 30-9-2012 and, accordingly, the return filed on 29-9-2012 was under section 139(1). The learned Commissioner (Appeals) could have answered the legal issue raised before him by the assessee only on the basis of the truth of the averments made in the assessment and appellate proceedings. Rather, any conflict or ambiguity on facts, relevant for the purpose, would oust the assessee’s pleading of the said issue per legal grounds, raised for the first time before him. There is no question of retracting the Ground raised before the first appellate authority, or the averment made thereby, i.e., at this stage, being in relation to a fact material to the adjudication of the legal issue raised by him for the first time before the said authority, and which is now pressed before us. We do note and are conscious that the Revenue also records the assessee’s first return as a belated return in-as-much as there is a charge of interest under section 234A for the delay in the filing of return per assessment under section 143(3). However, the same is without any basis. As aforesaid, there is no mention of the assessee’s status as a working partner in the partnership firm, VCE, or of its accounts being audited, in the assessment order under section 143(3), so that the same is only with reference to the due date mentioned by the assessee per his return of income (copy on record), i.e., 31-8-2012. However, as aforesaid, any conflict with regard to the due date under section 139(1) for the relevant year would only operate to oust the assessee’s legal case, raised in the appellate proceedings for the first time in-as-much as the same would require determination of facts relevant for adjudicating the same in the first place. There is, as afore-noted, no reference to the assessee being a working partner at any stage, i.e., prior to or de hors the assessee raising the said legal plea, which, as it turns out, is a material fact. This also explains the assessee’s grounds before us. The assessee’s Gd. 3 before us raises a question of fact, which is a material fact for deciding the legal issue raised per Gd.4. Under the circumstances, therefore, the legal issue raised by the assessee shall have to be necessarily decided on the basis of the assessee’s avowed stand in the assessment and appellate proceedings. Toward this, the assessee’s revision of his return, implying the original return to be under section 139(1), as well as his averment per Gd. 5.3 before the first appellate authority, assumes critical significance. This is as the same could not but be accorded deference and cognition by the Revenue except where it has material contradicting the same, and which is completely absent. This is precisely what stands stated earlier by us, i.e., that the learned Commissioner (Appeals) could only proceed in the matter on the basis of the truth of the assessee’s contentions before him. It needs to be appreciated that it is only the assessee who is in the intimate know of his affairs as well as the changes in his particulars during the relevant year, i.e., with reference to an earlier year. In the scheme of things, therefore, a rebuttal by the Revenue could only be on the basis of contradicting material. And, which again can be relied upon only after allowing the assessee an opportunity to explain the same. In the present case, the issue having been raised only in the appellate proceedings for the first time, its admission is subject to its determination on the basis of clear, undisputed facts, failing which it is liable to be denied admission. The law in the matter is well settled. Reference in this regard may be made to the decision by the Honorable jurisdictional High Court in CIT v. Abhinitha Foundation (P) Ltd. (2017) 396 ITR 251 (Mad), rendered upon noticing and referring to a plethora of decisions, including by the Hon’ble Apex High Court and, further, by the larger benches thereof, as well as by the its earlier judgments, as in Ramco Cements Ltd. v. Dy. CIT (2015) 373 ITR 146 (Mad) and CIT v. Malind Levitators (P) Ltd. (T.C. (A) No. 874/2014, dt. 18-11-2014).
In sum, it is reiterated that an appellate authority has the power to consider the assessee’s claim even if not made per a return or revised return of income where the relevant material is on record and the claim is otherwise tenable in law. In the present case, the claim is for negation or declaring invalid the assessee’s return in law and, consequently, the assessment framed in pursuance thereto, which the assessee is well entitled to make, provided there is no dispute qua facts required to determine the issue arising. Where the relevant facts are not on record, or the material or record points otherwise, or are to be brought on record, the claim cannot be admitted. At this stage, we may also clarify another aspect of the matter. It may be argued that the partnership deed of VCE shall bear out whether the assessee is or is not a working partner in the said firm for the relevant year. True, but the instrument of partnership shall be a part of the assessment record of the said firm and not of its partners. Further, even if, for the sake of argument, the assessment record or return for the earlier year indicates the assessee to be not a working partner, it cannot be said that the same position continues, or its accounts are subject to audit under law for the current year. That is, there is nothing on record to exhibit that the assessee is a working partner or not so, i.e., one way or the other, except the averment per Gd. 5.3 supra. Rather, the contrary claims by the assessee, stating the due date filing of return as 31-8-2012 (in the computation of income for the year), while at the same time preferring a revised return, i.e., under section 139(5), as well as contending per the grounds of appeal to be a working partner, so that the due date is 30-9-2012, makes his claim untenable, i.e., in the absence of any material establishing same.
In conclusion :–
5. The question of law raised by the assessee before the first appellate authority as to whether the assessee’s return of income filed on 21-10-2013 is a valid return in law, as it transpires, hinges on whether the assessee is a working partner in the partnership firm VCE, or only a partner, as claimed by the assessee and, further, if the accounts of the said firm are subject to audit under section 44AB of the Act. This also explains the grounds of appeal assumed before us, which though highlight only the first aspect (per Gd.3). There is nothing on record, or brought on record, for the learned Commissioner (Appeals) to answer the legal plea as to the invalidity of the second return, and thus of the assessment made in pursuance thereto, raised by the assessee before him. He, however, presumes both these facts, i.e., of the assessee being a working partner in VCE, and of it being an assessee covered under section 44AB (refer para 4 of the impugned order), to hold the assessee’s first return as a valid return under section 139(1), which could therefore be revised and, thus, his second return as a valid return under section 139(5). That is, issues a finding which he could not, i.e., in the absence of any material on record exhibiting the assessee to be a working partner in a firm whose accounts are subject to tax audit, viz., the instrument of partnership as applicable for the current year; the firm’s balance-sheet, or even its computation for the current year, etc. Rather, we observe contrary claims by the assessee in the matter, albeit to the same effect, i.e., an inability to answer the legal issue arising in the definitive. No wonder the learned counsel would, in his pleadings before us, submit that the matter be restored for consideration by the assessing officer – a course of action which is clearly impermissible, except where the facts are borne out by the record, which is clearly not the case. This, then, makes the assessee’s legal plea raised per the additional ground in the appellate proceedings inadmissible in-as-much as it is only where the facts necessary for answering the same are borne out by the record or otherwise not in dispute, that the same could be admitted in the appellate proceedings. The law in the matter is well-settled, and toward which reference be made, inter alia, to the decisions in National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC) and Jute Corporation of India Ltd. v.. Commissioner (1991) 187 ITR 688 (SC), reference to which stands made, reproducing therefrom, in Abhinitha Foundation (P) Ltd. (supra) (at pgs 258-259), clarifying that where the relevant material was available on record, the legal question could be answered by the appellate forum itself or through a remand to the assessing officer (para 18/pg. 264 of the Reports). There is no reference to the assessee’s status as a working partner in a firm whose accounts are subject to audit under law, in the assessment order, or any material on record exhibiting so, so as to be regarded as an admitted fact, with in fact the assessee himself making contrary claims in its respect per his grounds of appeal (Gd. 5.3) and additional grounds of appeal (Addl. Gd.1) before the first appellate authority, before whom, the legal issue, requiring as a pre-requisite undisputed facts, was raised for the first time. The assessee could have, observing r. 46A, placed before the learned Commissioner (Appeals) material in support of his Gd. 5.3, i.e., as to he being a working partner, and the accounts of the firm VCE being subject to audit under section 44AB of the Act, which would enable him not only to decide the said ground, but also, like-wise, the legal issue raised per the additional grounds. This was in fact incumbent on the assessee in view of the contrary stands being assumed, and in any case to enable answering the grounds raised by him. Why, he could also explain the basis – whatever it may be, for furnishing the revised return, implying the original being under section 139(1), as well as the averment (qua facts) per Gd. 5.3. The same cannot, it may be appreciated, be presumed to be without any basis. The raising of the additional ground by the assessee, contradicting his earlier factual stand, appears to be an afterthought. The learned Commissioner (Appeals) could not have, as it turns out, admitted the assessee’s additional grounds of appeal before him. We may hasten though to add that the position would be different had the assessee raised the said legal plea before the assessing authority, who could, in that case; the matter being wide upon, be bound to determine all the factual and legal aspects of the matter. Why, he could even issue a notice under section 148 where he found the assessee to be indeed not a working partner in a firm subject to tax audit, to bring the undisclosed income to tax. This, in fact, raises a larger question, i.e., could anyone take advantage of his own wrong – as the filing of the ‘revised’ return stated to be (per Addl. Gd.1), which is impermissible in law. That the assessee supports the said filing per his Gd. 5.3 (also before the first appellate authority) further confounds the matter, clearly making his Addl. Gds. inadmissible.
The Revenue, however, though not in appeal, is not constrained by the said admission (of the assessee’s legal ground) by the learned Commissioner (Appeals) in-as-much as it can, as it does, support his order on any ground decided against it (r. 27 of the Income Tax (Appellate Tribunal) Rules, 1963). In other words, the question of admission of legal issue cannot prejudice the Revenue’s case. There is, as we observe, no reference to, nor any material on record, which would bear out the relevant facts necessary for answering the legal question, with the Revenue entitled to support the impugned order in any manner. Rather, and even otherwise, it is the correct legal position that is relevant, and not the view that the parties may take of their rights in the matter (refer: CIT v. C. Parakh & Co. (India) Ltd. (1956) 29 ITR 661 (SC); Kedarnath Jute Mfg. Co. Ltd. v. Commissioner (1971) 82 ITR 363 (SC)). Further still, rule 11 & 27 of the Appellate Tribunal Rules are not exhaustive of the powers of the Tribunal (Hukumchand Mills Ltd. v. CIT (1967) 63 ITR 232 (SC)). In fact, continuing further, even if the said ground/s are taken as admitted, i.e., for the sake of argument, the same is to be answered on the basis of ‘admitted’ facts, i.e., the assessee filing the revised return and contesting the late filing of the first return (by one month) on the factual basis that he is a working partner in VCE, whose accounts are subject to audit under section 44AB. That is, answered against the assessee, in-as-much as the first return becomes a return filed within the due date prescribed under section 139(1). This is in the absence of any material on record to rebut the assessee’s claims, and which, where so, would require being confronted to the assessee. The contrary claims qua the relevant facts by the assessee makes the admission of his legal issue untenable. In our clear view, therefore, the assessee’s legal ground, raising a valid question, becomes inadmissible in view of indeterminate facts. Toward this, we have already noted that Gd.3 raises a question of fact–for which there is no material, so that a set aside to the assessing officer was proposed by the learned Authorized Representative during hearing, answer to which, along with the further (factual) issue of the firm’s accounts being subject to audit, would only enable answering Gd. 4 before us. That is, we are faced with a situation similar to that by the learned Commissioner (Appeals), besides the larger question afore-referred, rendering the said Gd.4 inadmissible. And, in any case, could be answered, as by the Revenue, only against the assessee, i.e., on the merits.
Further, the additions made in assessment, also challenged before the learned Commissioner (Appeals), have been answered by him against the assessee (vide paras 4.1 & 4.2 of the impugned order). His order has not been contested before us on the merits of the same, either per the grounds of appeal or even orally. There is, accordingly, no question of our traveling to or reviewing the said part of his decision. The assessee has, however, being charged interest under section 234A inasmuch as the same has not been deleted by the learned Commissioner (Appeals), and which has been contested per Gd. 5.3 before him. Though the assessee has before us not raised any grievance with regard to the same; in fact, ‘retracting’ it – and which could not be before us, the same, i.e., the said charge, is inconsistent with the order by the learned Commissioner (Appeals), as well as, in fact, our order stating the assessee’s legal claim as to the invalidity of his second ‘return’ as being inadmissible in view of indeterminate facts, being in fact subject to contrary claims and, in any case, answerable only against the assessee in view of its avowed stand in the assessment (filing a revised return, which can only be under section 139(5)) and appellate proceedings (per Gd.5.3 supra). The Revenue cannot treat the assessee’s first return as a valid return under section 139(1), so that it could be revised under section 139(5), and at the same time charge interest under section 234A (i.e., for the delay in filing the return), implying it to be a belated return, filed under section 139(4), again showing, if that was still necessary, indeterminate facts. We, accordingly, direct its deletion. As explained in CIT v.. Walchand and Co. (P) Ltd. (1967) 65 ITR 381 (SC), the tribunal is to deal with and determine all the questions which arise out of the subject matter of appeal, in light of the evidence and consistently with the justice of the case. We decide accordingly.
6. In the result, the assessee’s appeal is disposed of on the foregoing terms.
